REVENUES

Revenues by disaggregated category were as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Product revenues:
Gross product revenues	$	738,529		$	402,569		$	151,499
Discounts and allowances	(119,250		)	(53,561		)	(16,124		)
Net product revenues	619,279			349,008			135,375
Collaboration revenues:
License revenues⁽¹⁾	192,188			96,637			56,286
Research and development service revenues⁽²⁾	39,501			8,737			—
Other collaboration revenues⁽³⁾	2,858			(1,905		)	(207		)
Total collaboration revenues	234,547			103,469			56,079
Total revenues	$	853,826		$	452,477		$	191,454

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(1)

Upon the adoption of Topic 606 as of January 1, 2018, the allocation of proceeds from our collaboration partners, including upfront and milestone payments, between intellectual property licenses and research and development services as well as the resulting timing of recognition have changed. License revenues for the year ended December 31, 2018 included the immediate recognition of the portion of milestones that were allocated to the transfer of intellectual property licenses for those milestones for which it had become probable that a significant revenue reversal would not occur, as well as royalty revenues from Ipsen and Genentech. License revenues for the years ended December 31, 2017 and 2016 included the full recognition of substantive milestones achieved during the period, recognition of deferred revenues from upfront payments and a non-substantive milestone, which were being amortized over various periods, as well as royalty revenues from Ipsen and Genentech.

(2)

Research and development service revenues for the year ended December 31, 2018 included the recognition of deferred revenue for the portion of the upfront and milestone payments that have been allocated to the research and development service performance obligations which are being amortized through early 2030, as well as development cost reimbursements earned on our collaboration agreements. As described above, prior to the adoption of Topic 606, we did not allocate any of our upfront payments or milestones to research and development services; therefore, Research and development service revenues for the years ended December 31, 2017 included only development cost reimbursements earned on our collaboration agreements.

(3)

Other collaboration revenues for the year ended December 31, 2018 included royalties we paid to GSK on Ipsen’s sales of products containing cabozantinib, the profit on the U.S. commercialization of COTELLIC from Genentech and product supply revenues. Other collaboration revenues for the years ended years ended December 31, 2017 and 2016 included only royalties we paid to GSK on Ipsen’s sales of products containing cabozantinib and product supply revenues, as the profits and losses on the U.S. commercialization of COTELLIC for the period were included in Selling, general and administrative expenses.

During the year ended December 31, 2018, Net product revenues and License revenues related to goods and intellectual property licenses transferred at a point in time and Research and development services revenues related to services performed over time. License revenues and Research and development services revenues were recorded in accordance with Topic 606 during 2018 and Topic 605 in prior periods. Other collaboration revenues, which included royalties we paid to GSK on Ipsen’s sales of products containing cabozantinib, the profit on the U.S. commercialization of COTELLIC from Genentech and product supply revenue, were recorded in accordance with Topic 808 for all periods presented.

Net product revenues disaggregated by product were as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
CABOMETYX	$	599,946	$	324,000	$	93,481
COMETRIQ	19,333		25,008		41,894
Net product revenues	$	619,279	$	349,008	$	135,375

Total revenues disaggregated by significant customer were as follows (dollars in thousands):



	Year Ended December 31,
	2018				2017				2016
	Dollars		Percent of total		Dollars		Percent of total		Dollars		Percent of total
Ipsen	$	182,879	21	%	$	69,792	15	%	$	33,252	17	%
Caremark L.L.C.	110,698		13	%	73,921		16	%	17,746		9	%
Affiliates of McKesson Corporation	99,916		12	%	48,662		11	%	13,143		7	%
Accredo Health, Incorporated	81,028		9	%	50,716		11	%	16,631		9	%
Diplomat Specialty Pharmacy	74,244		9	%	83,059		18	%	63,826		33	%
Others, individually less than 10% of Total revenues for all periods presented	305,061		36	%	126,327		29	%	46,856		25	%
Total revenues	$	853,826	100	%	$	452,477	100	%	$	191,454	100	%

Total revenues disaggregated by geographic region were as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
U.S.	$	632,927	$	367,906	$	140,709
Europe	182,879		69,792		35,745
Rest of the world	38,020		14,779		15,000
Total revenues	$	853,826	$	452,477	$	191,454

Net product revenues are attributed to regions based on the ship-to location. Collaboration revenues are attributed to regions based on the location of our collaboration partners’ headquarters.

Product Sales Discounts and Allowances

The activities and ending reserve balances for each significant category of discounts and allowances (which constitute variable consideration) were as follows (in thousands):



	Chargebacks and Discounts for Prompt Payment			Other Customer Credits/Fees and Co-pay Assistance			Rebates			Returns			Total
Balance at December 31, 2016	$	1,802		$	794		$	2,627		$	351		$	5,574
Provision related to sales made in:
Current period	33,310			7,301			14,390			—			55,001
Prior periods	(817		)	—			(624		)	—			(1,441		)
Payments and customer credits issued	(32,367		)	(6,300		)	(10,623		)	(351		)	(49,641		)
Balance at December 31, 2017	1,928			1,795			5,770			—			9,493
Provision related to sales made in:
Current period	75,543			13,015			31,040			2			119,600
Prior periods	(403		)	206			(153		)	—			(350		)
Payments and customer credits issued	(74,746		)	(11,978		)	(24,741		)	(2		)	(111,467		)
Balance at December 31, 2018	$	2,322		$	3,038		$	11,916		$	—		$	17,276

Chargebacks and discounts for prompt payment are recorded as a reduction of Trade receivables, net and the remaining reserve balances are classified as Other current liabilities in the accompanying Consolidated Balance Sheets.

Contract Assets and Liabilities

We receive payments from our licensees based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. Upfront and milestone payments may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements and are recorded as deferred revenue upon receipt or when due. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded as unbilled collaboration revenue when recognized. Changes in our contract assets and liabilities under Topic 606 were as follows (in thousands):



	Contract Assets: Unbilled Collaboration Revenue						Contract Liabilities: Deferred Revenue
	Current Portion			Long-term Portion			Current Portion			Long-term Portion
Balance at December 31, 2017	$	—		$	—		$	31,984		$	238,520
Adoption of Topic 606	9,588			12,247			(23,591		)	(213,079		)
Balance at January 1, 2018	9,588			12,247			8,393			25,441
Increases as a result of a change in transaction price and recognition of revenues as services are performed	37,881			4,545			—			—
Transfer to receivables from contract assets recognized at the beginning of the period	(46,052		)	—			—			—
Increases as a result of the deferral of milestones achieved in period, excluding amounts recognized as revenue	—			—			1,718			7,237
Revenue recognized that was included in the contract liability balance at the beginning of the period	—			—			(8,683		)	—
Other adjustments ⁽¹⁾	(1,417		)	(16,792		)	(1,428		)	(16,781		)
Balance at December 31, 2018	$	—		$	—		$	—		$	15,897

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(1)	Includes reclassification of deferred revenue from long-term to current and adjustments made due to netting of contract assets and liabilities by collaboration agreement.

During the year ended December 31, 2018, we recognized $198.1 million in revenues under Topic 606 for performance obligations satisfied in previous periods. Such revenues primarily related to milestone and royalty payments allocated to our license performance obligations of our collaborations with Ipsen and Daiichi Sankyo.